Impact of the economy on angel investing

Many people have been asking lately if the current economic crisis has affected angel investing. In fact, its what many of us angels have been talking about recently.

At Robin Hood, we've seen the following:

• We are still actively investing. In fact, we've made three investments since August. CoreEssence Orthopedics, Global Print, and NanoPack, and we've got a few more in the pipeline.
• Angels are still willing to invest, but the fundamentals must be sound. We are looking for companies that have "must-have" products or solutions, are managing cash appropriately, and have a sound business model.
• Companies must raise enough money to get them through the next 18 months, because there is no guarantee that someone else will come in for an additional round. Therefore, no angels are investing until it is clear the round will complete, and that is leading to more and more cooperation amongst angel groups. And that cooperation is great for the region and for entrepreneurial companies. Nanopack is a great example. Robin Hood, MAG, Delaware Crossing, and LORE worked together on this deal, and were able to raise a significant round together.
• Valuations are becoming very reasonable as a result of economic change.
• This could be a good opportunity for start-ups to find that experienced person that they have been looking for.

Learnings from the Founders Factory

RHV members recently attended an event Philly Start-Up Leaders' Founders Factory. (Our Executive Director was on the advisory committee for this event). The energy and enthusaism for this event was tremendous.

It started with Steve Goodman providing an overview of the history of the entrepreneurial ecosystem in the Philadelphia region, included three fishbowls, where entrepreneurs got to ask a panel of experts for help with strategy, and had keynote speeches from several entrepreneurs in Philadelphia - Josh Kopelman, Lucinda Duncalfe Holt, Bob Bickel and Gil Beyda.

There were several takeaways from this session:

• Investors are still investing, but they want to ensure that the entrepreneurial ventures have good fundamentals.
• The economic situation will continue for another 12-18 months, but companies that can survive this period will come out much strong.
• Entrepreneurs need support from the community, and not just cash. Mentoring, contacts, a forum to come together....

Don't Ask for an NDA

From time to time, we are asked to sign an NDA. Please be aware that most VCs and angels will always say no to that request.

On our website we say:
"Since we receive so many plans our policy is not to sign NDAs (non-disclosure agreements) or confidentiality agreements. Robin Hood prides itself on our practice of the highest respect and care of the confidentiality of all information received; aiming to treat you as we ourselves wish to be treated. However, you should not, under any circumstance, forward confidential or proprietary information to us. "

We can't sign them for several reasons... first of all, it is not a coincidence that great ideas come to multiple companies... smart companies are trying to fill a market need, and its not unusual that more than one entrepreneur sees the same need at the same time. Secondly, we invest in areas where we have expertise. This means that our members generally are deep into a particular industry, and so signing an NDA would make it difficult for them to work in their industry.

Our suggestion is for you to write an executive summary that conveys enough of what is different to get us excited enough about your company to want to talk to you in person, but not so much that you are putting the company's special sauce at risk. It's a fine line, but your professionional service providers should be able to help you balance this.

For more information, see http://venturehacks.com/page/3. They do a nice job of describing this issue from the entrepreneur's perspective.

Angel Venture Fair 10

It's that time of year... time to apply to the Angel Venture Fair. This is an excellent opportunity for companies to obtain access to a large group of investors. For more info, see www.angelventurefair.com

Who Should Join Robin Hood?

We'll be the first people to admit that joining Robin Hood is not for everybody.

If you have allocated some portion of your investment portfolio to early stage, or start-up companies, but you have no time or real interest in looking at the companies, then one of the many local angel funds would be perfect for you.

At the other end of the spectrum, if you have tremendous resources of both time and money to commit to angel investing, and you have access to quality deal flow, then you may not see great value in joining Robin Hood.

The best fit is for individuals who have the money and the appetite for angel investments, and who have the interest in participating in due diligence, perhaps deal structuring, maybe serving on a board – in short, being an active investor, but with the support of an organization.

As a side note, the Executive Director of our group always says that she can tell when someone will really get the most value out of Robin Hood... they've recently sold their business, have had a few weeks at home without making "the life of the company depends on this" decisions, and their spouses want them out of the house...

Angel Group Organization Structures

People often ask us about the different types of angel groups, and how to know which is the right type of angel group for them. Here's some thoughts on the angel group landscape.

Individual Angels
Individual angels invest on their own, and run the gamut from putting in $10K to your entire funding amount. They can be found in the Philadelphia area through your accountant or attorney, and many of them attend local angel groups through PIF.

Angel Networks
These angels look at deals as a group, but invest as individuals.

Angel Funds
Angel members buy units in a fund, and vote their units on investments. In a fund,
angel investors participate in the selection, due diligence and voting process. Generally a majority of members direct where funds are placed.

Angel Hybrid
Angels join a group, invest together in each deal as a partnership, but each individual member determines how much they choose to invest in each deal. They can opt in or out of any deal. Robin Hood Ventures is an angel hybrid.

Deal Activity

Deal activity for this quarter was very high - two investments, two liquidity events.